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AHS Hospital Corp. v. Curiale

A-6966-97T3 (N.J. Super. App. Div. 2000) (Unpublished)

LEASES; LATE FEES; WAIVER—Acceptance of late rent payments without objection can be found to be a waiver of late fee charges.

Tenant occupied a commercial property pursuant to a five year lease. The lease gave the tenant an option to purchase the property by a given date in return for a substantial deposit. If the tenant did not timely exercise the option, the lease agreement would continue for a short period of time after which the tenant was to required to vacate the property. The deposit was to be returned, without interest, upon termination and timely vacation of the premises. In addition, the lease called for monthly rent and imposed a late fee on any payment made more than ten days after its due date. At the beginning of the lease term, the tenant was frequently late in making its payments and, as a result, the landlord’s mortgagee set up a “lock-box” so that the rent payments would be made directly to it. When the tenant did not exercise its option to purchase the building, it timely vacated the premises and demanded return of its deposit. The landlord refused, claiming that the tenant had not complied with its obligation to deliver proof that it had complied with all ECRA requirements. In fact, the tenant had complied but did not furnish evidence until after the lease had ended, which was after the tenant had vacated the property. Further, the landlord alleged that its tenant had left the premises in extremely poor condition. Lastly, the landlord claimed that its tenant was obligated to pay late fees for the many times during the course of the lease that the tenant’s rent was not paid on time, but the only late payments that landlord was able to prove were the initial five payments. With respect to the landlord’s attempt to collect double the monthly rent pursuant to the lease because of the tenant’s alleged holdover, the Court, after reading the lease, held that the holdover provision in the lease was triggered only by noncompliance with ECRA. Here, the tenant complied with ECRA, but only delivered evidence of its compliance several weeks late. The Court found that this late notice to the landlord did not impact the landlord’s ability to rent the property. Further, the landlord was unable to prove that its tenant left the premises in an unacceptable condition. The Court also pointed out that the record amply supported the lower court’s decision that the landlord had waived any late fees. This precluded the landlord from enforcing the late fee provision. “The penalty provision calling for late charges was due when the rent was accepted. Therefore the late rent charges merged with the payment.”


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